California medical groups to pay $62M in False Claims Act settlement

Seoul Medical Group and its former president, Renaissance Imaging, have agreed to pay $62.85 million to resolve allegations of violating the False Claims Act by submitting incorrect diagnosis codes to Medicare Advantage.

What happened

The U.S. Department of Justice (DOJ) announced that Seoul Medical Group, Inc. (SMG), a California-based primary care provider, its former president and majority owner, and Renaissance Imaging Medical Associates Inc. (Renaissance), a California-based radiology group, have agreed to pay a combined $62.85 million to settle allegations of False Claims Act violations. The allegations center around the submission of unsupported diagnosis codes to Medicare Advantage Organizations, leading to increased government reimbursement.

The settlement follows a partial intervention by DOJ’s Civil Division, in coordination with the U.S. Attorney’s Office for the Central District of California and the Office of Inspector General for the Department of Health and Human Services (HHS-OIG).

Read also: OIG warns against payment schemes in the Medicare Advantage program

Going deeper 

According to the DOJ’s complaint, SMG engaged in fraudulent activities to inflate Medicare reimbursement rates, including:

• Training providers to diagnose patients with high-reimbursement risk-adjusting codes, even when lacking clinical justification.
• Employing a nurse to modify medical records post-visit to support otherwise unsupported diagnoses.
• Collaborating with Renaissance to fabricate radiology reports to substantiate false diagnosis codes.

The fraudulent activity largely involved spinal enthesopathy but also included diagnoses such as sacroiliitis, hepatitis, arthritis, autoimmune disorders, and vascular diseases, all of which contributed to inflated Medicare payments.

Additionally, SMG failed to correct unsupported codes flagged in a 2017 audit by Advanced Medical Management, Inc. (AMM). After acquiring AMM in 2018, SMG allegedly terminated certain personnel, including the whistleblower, to prevent corrections from being made. In response to questions from a Medicare Advantage payor regarding unusually high-risk scores, SMG allegedly misrepresented the issue as unique to the Korean patient population it served and used Renaissance to generate fake medical reports to justify the diagnoses.

What was said

“Medicare Advantage is a vital program for our seniors and the government expects healthcare providers who participate in the program to provide truthful and accurate information,” said Acting Assistant Attorney General Yaakov M. Roth of the Justice Department’s Civil Division. “Today’s result sends a clear message to the Medicare Advantage community that the United States will zealously pursue appropriate action against those who knowingly submit false claims for taxpayer funds.”

“My office is committed to ensuring that healthcare providers are held accountable for unlawful misrepresentations to Medicare and other healthcare programs,” said Acting U.S. Attorney Joseph T. McNally for the Central District of California. “As this settlement makes clear, we will diligently pursue those who defraud government programs.”

“Providers who game the Medicare program to increase profit undermine the foundation of care and diminish patient trust in the nation’s public health care system,” said Deputy Inspector General for Investigations Christian J. Schrank of the Department of Health and Human Services Office of Inspector General (HHS-OIG). “HHS-OIG will continue to collaborate with our law enforcement partners and rigorously probe false claims to the fullest extent possible.”

See also: HIPAA Compliant Email: The Definitive Guide (2025 Update)

FAQS

What is the False Claims Act?

The False Claims Act is a U.S. law that allows the government to take action against individuals or companies that submit false or fraudulent claims for government funds, including healthcare reimbursements.

What is Medicare Advantage?

Medicare Advantage (also known as Medicare Part C) is a program that allows Medicare beneficiaries to enroll in managed care insurance plans provided by private companies, which contract with the Centers for Medicare & Medicaid Services (CMS) to offer Medicare-covered benefits.

Go deeper: What does the Centers for Medicare and Medicaid Services (CMS) do?

Did the settlement include any criminal charges?

No criminal charges were mentioned in the settlement announcement. The case primarily resulted in a civil settlement under the False Claims Act.